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CARLISLE December 7, 2010. Cardo Martinez Lisandro Tsai Tom Wang Antti Zhang. Presentation Outlines. Company Overview Industry Overview Competitors SWOT Analysis Management Assessment Recent Financial Results Financial Valuations Recommendation. Company Overview.

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carlisle december 7 2010

CARLISLEDecember 7, 2010

Cardo Martinez

Lisandro Tsai

Tom Wang

Antti Zhang

presentation outlines
Presentation Outlines

Company Overview

Industry Overview


SWOT Analysis

Management Assessment

Recent Financial Results

Financial Valuations


company overview
Company Overview

Established in 1917 in Carlisle, Pennsylvania as Carlisle Tire & Rubber Company

Headquartered in Charlotte, NC

In 1986, Carlisle was incorporated as a holding company

Fortune 1000 company with 10,000 employees

A diversified global manufacturing company serving the construction materials, commercial roofing, specialty tire and wheel, power transmission, heavy-duty brake and friction, food service, aerospace and test and measurement industries.

2009: Recorded Sales $2,370 million

NYSE Ticker Symbol: CSL

Currently trading at $38.79


business segments
Business Segments
  • Carlisle Engineered Transportation Services
    • Manufactures bias and radial tires, specialty wheels, power transmission belts and off-highway braking and actuation systems
  • Carlisle Construction Materials (CCM)
    • Manufactures a complete range of single-ply roofing and water proofing systems focused on optimizing the performance of building envelope
  • Carlisle Food Services Products
    • Produces a wide range of commercial and institutional food service permanent ware, catering equipment, meal delivery system and disposable food containers

Source: 2009 Carlisle Annual Report pages 6 & 7

business segments1
Business Segments
  • Carlisle Interconnect Technologies
    • Designs and manufactures high performance wire and cable, RF/microwave connectors, avionics trays, racks, intergraded subsystem and complex cable assemblies
  • Carlisle Specialty Products
    • Trail King designs and builds specialized, custom heavy-haul and bulk commodity trailers, truck and trailer dump bodies, and other specialty trailers

Source: 2009 Carlisle Annual Report pages 6 & 7

business segments2
Business Segments

2009 Net Sales by business segments

Source: 2009 Carlisle Form 10K page 2

recent stock performance
Recent Stock Performance


industry overview
Industry Overview
  • Construction Material Industry
    • In 2014, the global construction materials market is forecast to have a value of $823.3 billion, an increase of 52.7% since 2009
    • Asia pacific accounts for 70.6% of global construction material market value
    • Recent decelerated growth intensified rivalry between market players in the construction materials market
    • The global construction materials market has experienced healthy growth in recent years. But in 2009 the growth rate dropped to 1.8 %. However, the outlook is positive with growth forecasted to accelerate over the coming years, beyond the rates from previous years.


industry overview1
Industry Overview

Global construction materials market segmentation II: % share, by value, 2009



industry overview2
Industry Overview

The global construction materials industry generated $539.3 billion in 2009 with a compound growth rate of 5% in the period 2005-09

The compound annual growth rate of the market in 2009-2014 is predicted to be 8.8%


industry overview3
Industry Overview
  • Tires & Rubber Industry
    • In 2014, the global tires & rubber market is forecast to have a value of $131.4 billion, an increase of 15.1% since 2009
    • Passenger car & light truck segment is the largest within the global tire & rubber market, accounting for 60.5% of the market’s total value
    • Asia-pacific accounts for 34.4% of the global tires & rubber market value
    • Rivalry is intense with four leading companies holding more than 62% of market share by value
    • After a period of steady growth, the tires and rubber market fell in decline in 2008, which further deepened into 2009. Recovery is expected in 2010, followed by slowly accelerating growth towards 2014.


industry overview4
Industry Overview

Global tires & rubber market segmentation II: % share, by value, 2009

Global tires & rubber market segmentation I:% share, by value, 2009


industry overview5
Industry Overview

The global tire and rubber market generated a market value of 114.2 billion in 2009, a decrease of 6.7% from previous year. The compound annual growth rate is 0.9% from 2005 to 2009.

The compound annual growth rate of the global tire and rubber market in 2009-2014 period is expected to be 2.9%



Cooper Industries plc

Crane Co.

Illinois Tool Works Inc.

Westlake Chemical Corp.

Eastman Chemical Co.

swot analysis
SWOT Analysis


  • Sluggish performance in certain segments
  • Growth is dependent on acquisitions
  • Sales primarily from US market


Diversified product portfolio

High quality products

Intellectual Property

Sources: MarketLine and 2009 Carlisle Annual Report

swot analysis1
SWOT Analysis


  • Rising raw materials prices
  • Intense competition
  • Products might become obsolete due to technology changes


Renewable energy source materials

Growth in global aerospace and defense market

Sources: MarketLine and 2009 Carlisle Annual Report

management assessment
Management Assessment

Management is dedicated to achieving low cost positions and providing service excellence based on superior quality, on-time delivery and short cycle times.

management assessment1
Management Assessment

Carlisle Operating System (COS)

Deployed enterprise-wide in 2009

Eliminates waste and improves efficiencies

Quickly becoming part of the company’s culture

Cost savings for 2009 is over $20 million. Similar savings are forecasted for 2010.

management assessment2
Management Assessment

“5-15-30-15-100 Vision”

Introduced in 2007

taxes quality of earning
Taxes (Quality of Earning)

Note on taxes from 2007-2009


Note on Pension 2006-2009

The average actual return (not geomean) has been 2.4%

The long term return is now 7% however they use moving thus the 12.15% expected return in 2009

The Pension is a liability, however its actual effects are not reflected on the income statement. Only the net is reflected on the balance sheet


Their strategy has evolved. Now they are simply pursuing returns!! (unfortunately we do not know what junk bonds they are invested in specifically). They label them as sovereign and corporate


The continuous breakdown of goodwill has made it difficult to have a better understanding of it. The largest goodwill is applied technologies

Notes on Goodwill 2005-2008

why securitization ended
Why Securitization Ended?

Management says its due to “Strong Cash Flows”. There is more!!!! That may be a reason, however; we believe its due them being offered approximately 60 cents on the dollar.

The market believes that receivables are risky. Company was dependent on this for acquisition thus acquisition may slow down unless leverage increases.

Allowance is 7.9 on 292.5 thus (7.9/(292.5+7.9)= .0263 or 2.63%

Write-off of $4.9 million in 2009

Allowance was $11.3 million in 2008 then dropped to $7.9 million. We can then infer that $11.3-4.9= $6.4 which then results in $7.9-6.4= $1.5 million bad debt expense.

When we look at the write off in comparison to the remaining allowance then 4.9/7.9= .6203 or 60% (is remaining).

financial valuations
Financial Valuations
  • Sales Projection
    • 5 Segments with different growth rate
    • The growth rate comes from industrial report, GDP forecast and personal adjustment
  • COGS Projection

2005 2006 2007 2008 2009

financial valuations1
Financial Valuations
  • WACC
  • Cost of Debt
    • Fair Value=>YTM
    • BBB Rating Spread+10 Years T notes
  • Cost of Equity
    • CAPM
      • Historical Beta
      • Unlevered Industry Beta=>CSL’s Beta
    • LTM ROE
    • Stock Market Return for 20 Years
financial valuations2
Financial Valuations
  • FCF
  • TEV
  • Share Price

The key question is if the transition from growth by acquisition to organic growth achievable. Looking at the past information as above mentioned we believe the metrics are difficult to achieve

However, if they achieve their target, their share value is about 59.13

We recommend to put this company on the watch list